"It is entirely possible that the Mineral Resource Rent Tax will have horrible, unintended consequences of the tax payers of Australia paying money to some of the world's biggest mining companies because the design of the tax was so hopelessly botched not once, but twice."

That's business commentator Tim Treadgold.

He's commenting on reports that multi-national miner Rio Tinto is set to get a refund on the mineral resource rent tax it paid.

Effectively meaning it won't pay a cent of the tax in its first year.

Mr Treadgold says the reports don't come as a surprise.

"The first tax was a disaster and threatened to kill the mining industry," he said.

"The second tax was just as much a disaster because it was actually designed by the mining companies and now they could be dipping into the pockets of Australian taxpayers, ironic isn't."

The tax has raised far less than the Federal Government originally predicted.

It was estimated to generate about $4-billion for government coffers in its first year, but it's only raised a $200-million.

Mr Treadgold says the funds could be eroded further because other companies could also receive a refund.

"The nature of the tax is based on a profit, if you don't earn that profit, if you in fact incur losses, yes you will get some money back," he said.

The coalition has run a critical and comprehensive campaign against the tax since the idea was first floated.

And now it's got something to really beat its chest about.

The assistant shadow treasurer Mathias Cormann says the latest revelation is just another embarrassment for the Government.

"I'm not surprised, it shows yet again what a mess the mining tax is, it is costly to administer, costly to comply with, it hasn't raised any meaningful revenue and now we find out that the little revenue it has raised is going to be refunded," he said.

Fundamentally flawed

The reports emerged when Rio Tinto released its half yearly results this week.

When asked to clarify if Rio would receive a refund on its previous tax contributions or not pay in the final quarter, the company's chief executive, Sam Walsh, avoided answering it.

"The MRRT is basically working as it was intended, it was designed as a tax on super profits," he said.

"We've seen that iron ore prices have reduced and that as a consequence of that, we're not seeing great triggering of the mining tax."

Mr Treadgold says it's not hard to see why the tax is failing to raise revenue.

"Profits are declining, therefore you pay less tax, it's as simple as that," he said.

"The depreciation factor is a major cause of what's happening and it's entirely legal because if you invest a million dollars into a new piece of equipment you are under tax rules allowed to write that off at a certain rate each year, that comes off your tax bill.

"The mining companies knew that when they designed the tax for the Government, obviously the Government wasn't awake at the time, you could say it was asleep at the wheel."

Consultant Philip Kirchlechner says the design of the tax was fundamentally flawed and it has caused more harm than good.

"There was a lot of pain for no gain, so we had all the pain in the form of uncertainty created, a lot of unease by foreign investors, who were surprised about it," he said.

"We didn't get anything for us in terms of additional revenue for the country, so it's really been a double negative."

Yo-yo industry

Any smart investor knows the iron ore game is cyclical.

Something Mr Treadgold says the big three miners are well aware of and perhaps fooled the government when negotiating the structure of the tax.

"There were voices at the time, including some at Rio Tinto, that keep parroting this phrase, they don't call us cyclical for nothing," he said.

"They knew, things go up, things go down and that is what has come to pass."

Mr Kirchlechner says the tax has deterred future foreign investment in a tougher market of reduced commodity prices, while failing to raise any money.

"Still I talk to Chinese and Japanese investors who are unclear about it and they cannot quantify what the impact of this tax might be, now or maybe in the future, so it's really made a lot of people nervous," he said.

The Prime Minister Kevin Rudd was asked whether he thought the tax was working when the Rio Tinto reports circulated.

He appears to have wiped his hands clean of the revamped MRRT, which was devised by Julia Gillard with the big three miners, shortly after he was dumped in 2010.

"In terms of Rio's bottom line, what I do remember about Rio, in partnership with various other interests in the country, embarked upon a wholesale campaign to destroy the resources super profits tax as it was back then, and the result as we all know from history is the MRRT."

He also says its design is unlikely to be revised.

"I've already been asked about whether we will change the MRRT, I think given the challenges we now face in the global economy, we should stick with what we've got and we intend to do so," Mr Rudd said.

Rio Tinto refused to clarify the reports when contacted by the ABC following the half yearly results.

It said details of its tax contributions would be released in its full year results next year.